Aug. 3 (Bloomberg) -- KKR & Co., the private-equity firm
managed by Henry Kravis and George Roberts, said second-quarter
profit fell 25 percent as market swings curbed the rebound of
its buyout holdings and income earned from them.

Profit excluding some costs decreased to $245.3 million, or
36 cents a share, from $328.1 million, or 48 cents, a year
earlier, New York-based KKR said today in a statement. The
shares fell the most in nine months as results missed the 41-cent average estimate of 10 analysts in a Bloomberg survey.

Investment income fell 35 percent to $239.8 million in the
quarter as asset growth slowed, curbing earnings from principal
investments. Fee-related earnings rose to $76.1 million from
$63.3 million, while gross distributable earnings increased to
$103.2 million from $77.1 million. The firm said it would pay an
11-cent per share distribution to stockholders, up from 8 cents
a year earlier.

KKR and its rival private-equity firms are navigating an
unstable global economy that’s delaying them selling or taking
public some companies they own. Corporations that have held off
making strategic acquisitions amid uncertainty are beginning to
shop, providing a likely “supplement” to initial public
offerings and secondary sales, Scott Nuttall, the firm’s head of
global capital, said today on a conference call.

KKR fell 75 cents, or 5.3 percent, to $13.39 at 4:15 p.m.
in New York Stock Exchange composite trading. The stock has lost
5.7 percent this year.

Raising Money

KKR stands to benefit from an increase in assets under
management from new funds, as pensions and other institutional
investors seek better returns and consolidate holdings with
fewer alternative fund managers, executives said on today’s
call.

The firm raised $750 million for oil and gas deals in the
second quarter and created a $500 million account for an
investor it didn’t name for deals in energy and infrastructure.
KKR said it’s raised $3.2 billion for those types of deals
during the past 18 months.

Assets under management increased 1.5 percent from the
previous quarter and 14 percent from a year earlier, to $61.9
billion. Private-equity investments grew 3.8 percent in value
from a year earlier.

Net Income Rises

“We’re pretty well funded in Europe right now with our
Europe 3 fund, we have a reasonable amount of capital left in
Asia, but we’re putting that to work relatively quickly,”
Nuttall said. For North America, the firm has about $4 billion
remaining that will be used to complete existing deals and fund
“a few more transactions” within the next three quarters, he
said.

KKR’s economic net income, the profit measure that Wall
Street analysts’ base their estimates on, hinges in part on how
much the value of KKR’s investments rose relative to how much
they gained in the same period a year earlier. It excludes some
expenses related to the firm’s public listing in New York last
year. The measure doesn’t comply with U.S. generally accepted
accounting principles.

Under those rules, KKR’s net income rose 32 percent to
$39.6 million from $29.9 million. Revenue climbed 35 percent to
$117.6 million.

Kravis and Roberts, who created the firm with Jerome
Kohlberg in 1976, are expanding KKR’s efforts beyond traditional
corporate leveraged buyouts. The firm is raising funds for
natural-resources deals and has said it will start its first
hedge fund this year.